CRS Annotated Constitution

Earmarked
Funds.—The appropriation of the proceeds of a tax to a
specific use does not affect the validity of the exaction,
if the general welfare is advanced and no other
constitutional provision is violated. Thus a processing
tax on coconut oil was sustained despite the fact that the
tax collected upon oil of Philippine production was
segregated and paid into the Philippine Treasury.568
In Helvering v. Davis,569 the excise tax on
employers, the proceeds of which were not earmarked in any
way, although intended to provide funds for payments to
retired workers, was upheld under the “general welfare”
clause, the Tenth Amendment being found to be
inapplicable.

Debts of the
United States.—The power to pay the debts of the United States is
broad enough to include claims of citizens aris[p.159]ing on obligations of right and
justice.570 The Court sustained an act of
Congress which set apart for the use of the Philippine
Islands, the revenue from a processing tax on coconut oil
of Philippine production, as being in pursuance of a moral
obligation to protect and promote the welfare of the
people of the Islands.571 Curiously enough, this
power was first invoked to assist the United States to
collect a debt due to it. In United States v.
Fisher,572 the Supreme Court sustained a statute
which gave the Federal Government priority in the
distribution of the estates of its insolvent debtors. The
debtor in that case was the endorser of a foreign bill of
exchange that apparently had been purchased by the United
States. Invoking the “necessary and proper” clause, Chief
Justice Marshall deduced the power to collect a debt from
the power to pay its obligations by the following
reasoning: “The government is to pay the debt of the
Union, and must be authorized to use the means which
appear to itself most eligible to effect that object. It
has, consequently, a right to make remittances by bills or
otherwise, and to take those precautions which will render
the transaction safe.”573

Clause 2.
The Congress shall have Power * * * To borrow Money on
the credit of the United States.

The original draft of the Constitution reported to the
convention by its Committee of Detail empowered Congress
“To borrow money and emit bills on the credit of the
United States.”574 When this section was reached
in the debates, Gouverneur Morris moved to strike out the
clause “and emit bills on the credit of the United
States.” Madison suggested that it might be sufficient “to
prohibit the making them a tender.” After a spirited
exchange of views on the subject of paper money, the
convention voted, nine States to two, to delete the words
“and emit bills.”575 Nevertheless, in 1870, the
Court relied in part upon this clause in holding that
Congress had authority to issue treasury notes and to make
them legal tender in satisfaction of antecedent
debts.576

When it borrows money “on the credit of the United
States,” Congress creates a binding obligation to pay the
debt as stipulated and cannot thereafter vary the terms of
its agreement. A law purporting to abrogate a clause in
government bonds calling for payment in gold coin was held
to contravene this clause, although the creditor was
denied a remedy in the absence of a showing of actual
damage.577

Clause 3.
The Congress shall have Power * * * To regulate
Commerce with foreign Nations, and among the several
States, and with the Indian Tribes.

This clause serves a two–fold purpose: it is the
direct source of the most important powers that the
Federal Government exercises in peacetime, and, except for
the due process and equal protection clauses of the
Fourteenth Amendment, it is the most important limitation
imposed by the Constitution on the exercise of state
power. The latter, restrictive operation of the clause was
long the more important one from the point of view of the
constitutional lawyer. Of the approximately 1400 cases
which reached the Supreme Court under the clause prior to
1900, the overwhelming proportion stemmed from state
legislation.578 The result was that,
generally, the guiding lines in construction of the clause
were initially laid down in the context of curbing state
power rather than in that of its operation as a source of
national power. The consequence of this historical
progression was that the word “commerce” came to dominate
the clause while the word “regulate” remained in the
background. The so–called “constitutional revolution” of
the 1930s, however, brought the latter word to its present
prominence.